Report of the 16th Finance Commission for 2026-31

The 16th Finance Commission (FC) report, chaired by Dr. Arvind Panagariya, was tabled in Parliament for the 2026-31 period. Key recommendations include maintaining states' share in the divisible pool of central taxes at 41%. The report details revised criteria for devolution, introducing 'Contribution to GDP' and adjusting weights for 'Income Distance', 'Population (2011)', 'Demographic Performance', 'Area', and 'Forest'. It recommends grants worth Rs 9.47 lakh crore for local bodies and disaster management, while discontinuing revenue deficit, sector-specific, and state-specific grants. The report also outlines a fiscal roadmap, suggesting a 3.5% fiscal deficit target for the Centre by 2030-31 and 3% for states, advocating against off-budget borrowings. Further recommendations cover power-sector reforms (DISCOM privatization), rationalization of subsidy expenditure, and public sector enterprise reforms.